Nuclear Energy Production Is So Profitable That Germany Plans a $2.8 Billion Per Year Windfall Profits Tax
It continues to frustrate me when people like Amory Lovins, Joe Romm or Craig Severance boldly claim that nuclear energy is “too expensive” despite all evidence to the contrary. Yesterday, World Nuclear News published another piece of evidence to add to the pile supporting the notion that many of the expensive cost drivers of nuclear energy are subject to human choices. That is in direct contrast to wind, solar, geothermal and hydro power, where most costs are related to the inherent challenge of building physical capital intensive collection systems that will produce a significantly less than their maximum design capacity for much of their operating lives.
Government policies abound that attempt to overturn the inherent physical limitations of popular renewable sources; when it comes to nuclear, most of the policies seem purposely designed to increase costs and slow schedules – which is essentially the same thing since money and time have an analogous relationship to mass and energy.
According to Huge nuclear tax on the cards in Germany, the German government has determined that it might reluctantly allow companies that own the 17 large nuclear plants that currently supply about 25% of the country’s electricity to continue to operate past their current legislatively determined limit of approximately 32 years of production. (The actual limit requires a bit of complex math and assumptions about performance for the entire fleet.)
However, the government has also determined that allowing the nuclear plant owners to continue to operate their assets would allow them to reap “excessive” profits because they are selling power into a market where the competitors have had their production costs increased as a result of carbon caps and emissions permit auctions. Obviously (NOT) the way to encourage companies to invest in technologies that do not produce any emissions is to levy an additional tax on them anyway to make the market more “fair” so they do not accumulate more resources that could be deployed in another round of new nuclear plant construction.
Maybe I should apply the same sentiment to Germany as I recently did to Vermont – I am sure glad I do not live there! (Actually, Germany would be worse than Vermont for me – I do not speak either German or Russian, which is likely to be their new language in the energy business.)
NEI Nuclear Notes noticed the head scratching German logic regarding nuclear energy economics and tax policies a couple of days ago Head Scratchers and Extorting Nuclear
Rod Adams wrote:
However, the government has also determined that allowing the nuclear plant owners to continue to operate their assets would allow them to reap “excessive” profits because they are selling power into a market where the competitors have had their production costs increased as a result of carbon caps and emissions permit auctions.
By the same illogic, when assets such as wind turbines and solar arrays are depreciated, they too should be taxed for “excessive” profits.
Maybe the obvious unfairness here will actually help the image of nuclear, both inside and outside of Germany. I imagine German Nuclear Engineers must be grinding their teeth in frustration. If there is any country I would expect could design and build reactors with great performance, it would be Germany.
Maybe if you just stop mentioning Lovins he will fade away. Personally I have felt that he was a has-been 20 years ago.
Steve – I hardly think that my frequent criticism of Lovins has anything to do with his continued ability to land plum and inflential contracts, speaking engagements, and interviews in important media outlets that influence decision makers.
The man continues to spread some extremely seductive but dangerous views. The only response I know is to repeatedly call him out and hope somebody notices.
Those “Zombies” sure are great money-earners. I hope the NPP operators market the hell out of that tax, pointing out how they are supporting the German people’s society and infrastructure, and suggesting their willingness to do more by building new plants which in ten years or so can also start contribute high tax rates. And meanwhile I would like an official response from the German government on how taxing nuclear is supposed to incentivize non-carbon power production.
Oh and Rod, off-topic, I was thining about the renaming/rebranding of nuclear power and couldn’t find your blog entry on that… but SNAP – supernova ash power – did I suggest that before?
It means the European carbon trading system is being selectively enforced and is nothing but a farce. It is merely an excuse to tax the producers of electricity and raise the price of energy! As soon as someone comes up with a real solution to avoid carbon emissions, it’s labeled a “loophole” and a “windfall profit” and a new arbitrary tax is imposed on them to level the playing field with coal fired electricity.
Jerry – I have a slightly different take. Current energy producers are the people who benefit the most from high energy prices. The coal industry is a possible suspect, but I am far more suspicious of the more wealthy and powerful folks who sell natural gas that is hugely profitable in a market where people have been convinced that it is “low carbon”, especially if all other sources have to pay higher costs.
I have a strong suspicion that the gas folks are a bit frustrated at this point. Throughout the 1990s and through the early part of the 2000s, their plan was working perfectly. They would keep pressuring nuclear power through their support of the greens and anti-nuclear movements in government and at the same time they would take market share from coal by getting people interested in the advantage of gas in terms of CO2 production per unit power. (On a per unit heat basis, gas is more expensive to extract, process and transport than coal, so it needs to find another measure that encourages people to put a higher value on it.)
The frustration among the gas pushers comes from that old adage – you can fool some of the people all of the time and all of the people some of the time, but you can never fool all of the people all of the time. Pretty soon, the focus on CO2 opened up curiosity among those people who did not really understand why they were supposed to be fighting nuclear energy. It also provided some spine to people who already knew that nuclear energy was superior to fossil fuel energy but were afraid to talk loudly about it for fear of being shouted down as a “nuclear industry shill.”
The battle is now far more interesting – nuclear energy will win out, but it needs some loud supporters who are willing to tell the truth – repeatedly.
Exzctly the same thing happened to a nuclear plant in Belgium last year after it had the temerity to pay off its capital costs ahead of schedule, so a local green politician slapped a windfall tax to sop up the earnings.
The even more nuclearized Sweden has already a tax on nuclear energy, equivalent of 0,67 eurocent per kWh or > 400 millions euros per year
http://www.world-nuclear.org/info/inf42.html